President Carter's tortuous tax course has been guided by a mixture of innocence and ideology, a fact confirmed the morning of Aug. 11 when a high-ranking Treasury official told a colleague that the bill passed by the House the previous night was really not so bad.
That not-so-bad bill has been quixotically opposed by the president in another demonstration of impotence. Innocently, Carter and principal aides have consistently misjudged the tax temper of Capitol Hill. Ideologically, he has insisted on using the internal revenue code as a device for the redistribution of wealth.
The White House decision to fight an unwinnable battle with precious little at stake was the capstone of the Carter tax follies. At any time up to a few weeks ago, he could have compromised to get a better bill from his standpoint than the one he unsuccessfully pursued on the House floor Aug. 10.
The resulting damage so far has been localized: further decline of presidential influence on Capitol Hill and unintended revival of the conservative coalition in the House. If Carter persists in the same course all the way to a veto, still threatened by the White House, the political consequences would be fundamental and severe.
Caught in the middle has been Treasury Secretary W. Michael Blumenthal, operating under stresses felt by few predecessors in his office. While he has shared the president's innocence about what can be passed in Congress, he has waged a losing battle against ideological rigidity in the White House.
Blumenthal was tardy, but well ahead of the still uncomprehending White House, in appreciating the congressional groundswell for capital-gains tax relief. His recommendation that the White House come to terms with the capital-gains proposal sponsored by Rep. William Steiger (R-Wis.) only confirmed the wrongheaded contempt of senior Carter aides that Blumenthal lacks true grit in charging the barricades.
An obvious compromise was at hand. In return for his amendment, Steiger was willing to deliver Republican support for a few Carter tax reforms that otherwise were stillborn. Blumenthal, interested in lowered capital-gains rates to induce capital formation, was ready to bargain. "If Mike had been given the power to negotiate," a senior congressman told us, "we would have had a bill weeks ago." But Blumenthal was denied authority to commit his administration.
The reason is the White House [WORD ILLEGIBLE] position to any tax proposal providing more relief for rich than poor. But that would be true for of any conceivable incentive for capital formation. While domestic policy aide Stuart Eizenstat is widely blamed for inspiring this Catch-22, the real instigator is Carter.
That became clear June 22 when three senior Democrats on the House Ways and Means Committee - chairman Al Ullman (Ore.), Dan Rostenkowski (Ill.) and Joe Waggoner (La.) - visited Carter at the White House. In response to their plea for compromise, the president would not buldge. That, for Ullman, was the point of no return.
After Ways and Means brushed aside administration proposals and approved its own tax cut, Waggoner implored Blumenthal to accept it as the best possible bill. Even some liberal Ways and Means members secretly recommended against a floor fight. But the president insisted on more tax relief for the poor and less for the rich.
In innocence shared between the Treasury and the White House, it was thought the administration might carry its substitute Aug. 10. It never had a chance. A dozen Democrats who backed it did so only because they were sure it would lose, delaying their votes until the issue was no longer in doubt. Most of the eight Republicans supporting the substitute would have switched if necessary.
The result was passage by the sword of what might have been done in peace, reviving a bipartisan conservative coalition whose appearance diminishes hope for liberal programs. The prestige of Speaker Thomas P. O'Neill has been diminished; the solidarity of Republicans and their collaboration with key Democrats, including Ullman, has been enhanced.
While the official administration position decries the House bill, Treasury technicians confide they would instantly accept it in preference to what the Senate will produce under the machinations of Finance Chairman Russell B. Long of Louisiana. Yet, presidential aides insist that if the House bill cannot be changed to conform to Carter's notions about redistributing income, a veto is possible.
Hardly anybody believes that. It is unthinkable that the president - having first lost his chance at a compromise containing some reform and having then provoked a purposeless and politically damaging fight in the House - would commit the ultimate folly of vetoing an election-year tax cut. But the unthinkable is commonplace in the Carter tax policy.